Discount Window Borrowing Jumps to $262 Billion

WASHINGTON — During another turbulent week on Wall Street, lending through the Federal Reserve Board's discount window skyrocketed to $262.3 billion on Wednesday, thanks to new lending programs unveiled during the week.

It was the second record in as many weeks and more than double from the previous high water mark.

The heaviest lending was centered on the primary dealer credit facility, which was established in March to give investment banks access to the discount window. The Fed eased terms on the facility on Sunday when it approved requests from Goldman Sachs and Morgan Stanley to convert to bank holding companies.

The Fed said Goldman and Morgan, the last of the major investment banks, could borrow on the same terms as commercial banks and with the same collateral. In response, lending through the PDCF totalled $105.662 billion on Wednesday, from $59.8 billion a week earlier.

Commercial banks were also very active at the discount window. Loans to banks increased 17.7%, to $39.9 billion, a new record.

Meanwhile, the Fed issued loans to weak banks for the second week in a row. These loans increased 5.6%, to $19 million on Wednesday.

The Fed's efforts to backstop the market for money market mutual funds appears to have been met with initial success. The Fed said Friday it would lend against asset backed commercial paper held by the funds. It distributed $72.7 billion by Wednesday.

The central bank also said American International Group Inc., the insurance giant the Fed bailed out on Sept. 16, drew $44.6 billion of its $85 billion government loan by Wednesday. A week earlier, the company had tapped $28 billion of the loan.

As the Fed continues to boost and widen its lending programs, concern has grown that too much of its balance sheet is being dedicated to helping banks survive the credit crunch. With these concerns in mind, the Fed grew its balance sheet by 22%, to $1.2 trillion.

The Fed was helped in these efforts by the Treasury Department, which began a program earlier this month to sell Treasury bills and send the cash generated to the Federal Reserve Bank of New York. The central bank said it received $159.8 billion from the Treasury through this program.